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The national wealth service

Wealth has a habit of concentrating itself in the hands of the few – and IFAs want those hands to be their own.

Targeting the high-net-worth market is seen as an attractive survival strategy for IFAs. Not only IFAs, but the banks have been seeking to bolster profit margins by focusing on the rich too.

Wealth management services aimed at the mass affluent have been all the rage but Lloyds TSB&#39s delayed launch of Create suggests the market may be getting overcrowded. But IFAs at the top end of the market report no such congestion.

Towry Law director Clive Scott-Hopkins does not believe there are enough quality advisers for this segment. He says: “Most IFAs seem to be chasing the middle ground which is perhaps saturated. But they need to hone their skills for the upper end.”

So who are this upper end? According to the Office for National Statistics, the richest 1 per cent own around a quarter of the overall wealth of the nation. If you include the wealthiest 5 per cent and discount the value of their homes, this share of wealth goes up to 50 per cent.

Figures from analyst Data-monitor show that the top 5 per cent of IFA firms account for two-thirds of annual IFA business.

IFAs specialising in the high-net-worth market are unanimous that the one essential ingredient is to establish a client base. Tips given by practitioners on how to establish a list of prospects vary from combing through the local paper and having a decent website to advertising nationally and arranging seminars.

But above all, networking is required. Scott-Hopkins says: “IFAs wanting to target high-net-worth individuals should join the local golf club or rotary club to mix with the right quality people.”

There is no exact definition of what constitutes high net worth. For some, it means a minimum of £1m in net assets, for others it is six-figure sums.

Wealth itself matters less than liquidity, says Baron-worth Investment Services director Colin Jackson. If the money is all tied up in the home they live in, then they might have little need for financial advice.

Some point out that the wealth of the family might also be a factor – a person might not be particularly rich but could stand to inherit considerable amounts and so reward attention.

As for the skills needed, Byrne Williams managing director Tony Byrne says: “It is important to have no fear of people with a lot of money. It is not more difficult, it is just that there are more noughts after the figure you deal with.”

There are some areas where IFAs need to have considerable expertise in. Scott-Hopkins stresses the importance of convincing clients with fluency and expertise in the areas of estate planning and inheritance tax mitigation in particular.

Most IFAs at this end of the market either have their own in-house accountancy practice or close associations with accountants and solicitors and many say cross-referrals are mutually beneficial.

Byrne says: “One of the first things we do can be to pass to client to our in-house accounts first for advice on tax efficiency. But there is an old saying – don&#39t let the tax tail wag the investment dog.”

As well as particular professional expertise, IFAs have to adapt their people skills to match the expectations of the clientele.

Jackson says: “We have some very well known people on our books. Some who are very high profile also demand a Rolls-Royce service and they get it. Availability to the client is very important and they tend to want immediate answers so being adequately staffed is important to give the ongoing service required.”

The background of the clients also has an impact on the selling process. Many who have achieved wealth as a result of being astute busin-esspeople. So be prepared for clients who want to negotiate remuneration.

Other IFAs point out that clients&#39 knowledge varies at the top end of the market as much as anywhere else and some will have suddenly come into money through lottery wins or inheritance.

When it comes to products, many of clients will be best served by sophisticated tax shelters such a VCT, some of which might required referrals. Likewise, inheritance planning might require the client to be pointed in the direction of a specialist lawyers.

Byrne says clients also respect him for not being afraid to refer elsewhere if specialist expertise is required.


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